Thursday, September 6, 2012

Broadcasting Dollars Level the Playing Field (a Little)

MLB's ESPN deal last week is about to be followed by deals renewing the league's coverage on both FOX and TBS according to John Ourand of the SportsBusiness Journal. The Biz of Baseball's Maury Brown analyzed the report and broke down what the FOX and TBS deals will mean when combined with the ESPN deal with respect to individual clubs:

While I projected as much as a 175% increase in television revenues in the new deals, that is likely too high. If the SBJ story holds water and a combined deal to cover the FOX and TBS programming hits $800 million annually, MLB will see total national television revenues of $1.5 billion annually, up 111% from the $711.7 million they receive now. How will this affect the individual clubs?
With MLB’s national media rights revenues part of the league’s central funds that are distributed evenly to all 30 clubs, each one will could see $50 million annually, up from $23.72 million, now. That could give each club the ability to be competitive for a star-caliber free agent, and then some.
Consider that the A's opening day payroll this year was $55,372,500 and you can see how the central funds are pivotal to small market teams. The money from these deals will actually increase -- ever so slightly-- payroll parity as the luxury tax of $178 is working, for the most part, like a salary cap.

In this exercise we are assuming the additional broadcast money is being plowed in to big league payroll -- as opposed to scouting and development or just being taken out as profits. If a team decides to breach the $178 million number -- I'm looking at you Dodgers -- with these new funds, the real value of the money over the $178 limit will be 20 percent less per the luxury tax for the first year and will increase thereafter. (Here is a good explanation of the luxury tax.) However, consider too that agents will know that each team has more to spend and will continue to push salary numbers up.

Anywhere and Everywhere
Part of baseball's interest in renewing with ESPN is, per this week's Bloomberg BusinessWeek cover story, is the cable network's ubiquitous nature -- mobile app (Watch ESPN), magazine (ESPN The Magazine), multiple cable networks and strong social media presence. Per August 30th article by Karl Taro Greenfeld:

(ESPN President John) Skipper’s advantage over his potential competitors—NBC Sports Network, Fox Sports, TNT—is ESPN’s ability to monetize live sports across multiple platforms. ESPN isn’t just buying the rights to televise a game on TV, it’s buying the rights to build hours of TV content around the game and to stream the action digitally and over its WatchESPN mobile application. Each live sporting event also generates advertising revenue on ESPN Radio, highlights for the ESPN networks’ various studio shows and websites, plus fantasy league updates, streaming sports news content, and beyond. That diversity of delivery vehicles gives ESPN more flexibility in terms of pricing.
Surely this appeals to baseball, which has adopted a similar strategy itself. The MLB.TV app turned 10 this year and remains the gold standard for professional sports (MLB's subsidiary has even generated non-baseball business with the NCAA on CBS and Glenn Beck's show). This year the league also created the "Full Count" app in partnership with Yahoo! that is akin to NFL's RedZone network -- full of live look-ins and highlights. The league also has several TV shows it produces, notably Showtime's The Franchise and NBC Sports Network's Caught Looking. Of course, the league also has a its own cable channel as well.

With football starting yesterday, that league's perennial walled-garden approach truly pales in comparison to MLB's largely open one. For instance, only Verizon customers can download the NFL Mobile app and out of market fans can watch their favorite team -- the Monday after the Sunday that team plays. Surely at least part of baseball's popularity is owed to its ability to produce, leverage and make readily accessible troves of high-quality content across platforms -- a lot like ESPN.

Billy Loves Trout

In case you missed the August 27th cover story on the Angels phenom Mike Trout, it featured a good bit of Billy Beane.

Here is part of what Beane had to say about Trout:

I will go to a box score every day to see what he's done—and you've got to go to so many categories that it takes a while. I swear, he's the only major league player where I will become an eight-year-old kid again.

The A's in the 2009 draft passed on Trout and selected current River Cat Grant Green. A contributing factor to passing might have been Beane's experience personally scouting Trout, as told by writer Tom Verducci:

Trout went 0 for 4 with four pop-ups and never was challenged on defense. Beane left Millville (NJ, Mike Trout's hometown) without seeing Trout's explosiveness. "You just had to believe what others were saying," the A's G.M. says now. "That's why scouting in high school is very challenging."
Oh well, at least the A's got Green who, while not being compared to Mickey Mantle, is doing fine in the minors and seems more akin to the Rays versatile Ben Zobrist.

The one funny thing about the SI article is that there is a lot of talk about the bias against cold weather, East Coast towns when it comes to prospects. Hasn't Moneyball taught us anything? You would think, if this bias is real, that the A's -- masters of market inefficiencies -- would be flooding the Northeast.